Domestic electricity price freeze will mean higher costs for businesses

The Newman Government has a clear mandate to implement its policies, but it will find implementation very difficult in a number of cases. The most obvious case is the promise that within its first 30 days the Government will:

Freeze or lower the standard domestic electricity tariff (Tariff 11) to address soaring power bills as part of cost of living relief (to take effect from 1 July 2012).

Electricity tariffs/prices are regulated by the Queensland Competition Authority (QCA) which allows prices to be set to recover costs and to provide a normal return on investment. If the Government implements this policy, electricity prices on non-domestic users (i.e. businesses) will need to rise even more than currently expected over the next few years, to make up the shortfall in revenue caused by the freeze on domestic prices. (Note that electricity prices will need to rise over the next few years to pay for network upgrades and the carbon tax.) Hence I expect peak business groups such as the CCIQ will strongly lobby the new Government to reconsider its promise to freeze domestic electricity prices.

For more of my views on the new Government’s commitments for its first 100 days see:

Training reform package is a winner

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